What If Inventory Financing Lenders Were the Solution to Your Cash Flow Based Financing

Just what if your firm had a significant inventory component and you had access to cash flow and working capital against that inventory investment in working capital that your firm has made.

A proper inventory financing facility in Canada is one in which you can draw down on a satisfactory level of your inventory value and repaid it as you replenish capital via account receivable and cash collections. Your success in achieving a proper inventory financing component in your overall business financing in effect optimizes your working capital to the extent you need to.

How would your overall financial position change with that additional working capital and cash flow? You would then have the ability to take on additional contracts and purchase orders, your supplier relationships would most probably improve, and faster asset turnover of assets and receivable generates faster profits and return on assets. Those are good things.

The main advantage of an inventory financing or A/R financing component is your ability to accelerate cash flow. Let’s be honest, if you were self financing (i.e. no borrowing facilities) and had to wait for inventory to be sold and receivables collected then you are significantly slowing your growth ability.

In the context of the inventory financing we are discussing this financing is not a loan per se - that’s important to understand. It becomes a part of your revolving facility and is simply collateralized by receivables and inventory.

Your inventory financing arrangement is reflected in a type of document generally known as borrowing base certificate. We also advise our clients that it is highly preferable to have a strong handle on your inventory reporting, and also you should preferably be using some sort of a perpetual inventory accounting system.

Inventory is a very generic term, we hate to do it but we complicate things further by discussing with clients the fact that inventory can consist of raw materials, work in process, and of course final finished goods inventory . As a result the valuation of what is financed varies by industry and inventory type. Slow moving or highly specialized product is much more difficult, but not impossible, to finance.

Could you be more competitive and profitable if you have inventory financing at 40-50% of your gross inventory value - we are pretty sure you could be!

On larger transactions you should fully expect some sort of initial appraisal and valuation on your inventory.

In Canada inventory finance is highly specialized, we can almost call it a niche financing. Speak to a trusted, credible, and experienced business financing advisor to determine if this financing works for you. Through that process you should be able to develop a clear understand of the differences between bank financing, asset based lending, which incorporates inventory finance, and purchase order financing if that is applicable to your business model .

At this point you are now in a position to ensure that inventory financing advances are a great way to acquire mfr and carry inventory for orders and contracts you receive.

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Stan Prokop - founder of 7 Park Avenue Financial - http://www.7parkavenuefinancial.com
Originating business financing for Canadian companies , specializing in working capital, cash flow, asset based financing . In business 6 years - has completed in excess of 45 Million $$ of financing for Canadian corporations .Info re: Canadian business financing & contact details:
http://www.7parkavenuefinancial.com/inventory_financing_lenders_cash_flow_financing.html

Benefits Of Invoice Factoring And Factors That Affect The Cost Of Factoring Receivables

You know the drill - you have all the working capital you need already - unfortunately its tied up in receivables - so how can invoice factoring help your firm and what is the cost of factoring receivables , because from what you have heard its expensive .

Let’s address those issues around the following key points: Exactly what is factoring, what are the benefits for your firm, what does it cost, and how does it work. That’s a mouthful, but your understanding of these key issues could be the first step in your better understanding of one of the most popular methods of business financing today in Canada.

Factoring is the method by which you ’ sell ’ your receivables as soon as you issue them. Selling anything gets you ’ cash ’ and that’s the core premise of factoring.

Do you have to sell your receivables? Of course not - you can wait 30/60/90 days for your customers to pay you - but you’ve been there already and that’s not working! That brings us to the main benefit of factoring, which is working capital and cash flow in an almost unlimited fashion. How can we say unlimited cash flow - well, simply because if you have receivables you will always have immediate cash for them. Cash flow problems solved!

Part of the problem in our clients understanding the cost of factoring is that they view it always as an ’ interest rate ’. The factor firm does not view or call it that - it is a discount rate. They purchase your receivable (either on, some or all of your invoices) at a discount - That discount in Canada is anywhere from 1-3%. The norm tends to be closer to 2%.

Clients will always ask if their firm ’ qualifies’ for this type of financing. The reality is that if you have receivables you qualify, and this type of financing covers pretty well every industry in Canada. There seems to be a number of industries that are always using factoring - i.e. trucking/transportation, staffing, security guards, etc - but don’t be confused by that point - if you have a receivable, Canadian, U.S. or otherwise , it can be financed - or in our lingo ’ sold’ and ’ cash flowed’.

We mentioned the key benefit of a factor facility is cash flow - you can of course arrange more traditional financing via a bank, Canadian credit union, etc. However, that type of financing comes with stringent requirements, including solid financial performance, personal guarantees, other collateral, etc. You can typically qualify for a factor facility in a week or so - the process simply involving a basis application and the documentation to register the facility, in a similar manner that any bank would, i.e. a security agreement on your receivables, etc.

One other key benefit is facility size - at a bank type revolving line of credit you have of course a limit, and you can’t exceed that limit .That concept goes out the window with your receivable financing facility because your limit grows lock step with your sales and receivable investment. That’s true unlimited financing!

It always comes down to cost and the overall pricing of your facility will depend on several factors - the overall size of your receivable portfolio, its credit quality, how your customers have paid traditionally, etc.

We recently met with a customer who advised us that their total all in rate with a Canadian bank, including the rate and fees for all services, etc, was close to 11-12% when you factor everything in. Let’s say your factoring rate was 2% per month. And lets also say you now had unlimited cash to pay suppliers promptly, take prompt payment discounts, and negotiate better pricing. From our perspective there immediately isn’t that much more difference in factor pricing and bank pricing when you weigh in all the comparables.

Speak to a trusted , credible, and experienced business financing advisor who can assist you in determining the best factoring pricing for your firm , and allow you to focus on benefits that you can reap from this growing in popularity business financing in Canada .

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Stan Prokop - founder of 7 Park Avenue Financial - http://www.7parkavenuefinancial.com
Originating business financing for Canadian companies , specializing in working capital, cash flow, asset based financing . In business 6 years - has completed in excess of 45 Million $$ of financing for Canadian corporations .Info re: Canadian business financing & contact details:
http://www.7parkavenuefinancial.com/invoice_factoring_cost_of_factoring_receivables.html

How to Finance a Film ,TV , or Animation Project Via a Film Tax Credit Film Financing Strategy

We can almost hear the newspaper crier already – ‘Read all about it, read all about it ... No changes to Canada’s film tax credit financing!”

What we are referring to is a rash of recent articles and TV news stories around the U.S. situation regarding film tax credit financing. Politicians in a number of states are waging a full stage war in some cases to abolish the entire film tax credit system, taking away these valuable subsidies that have become intrinsic in financing many non studio productions.

That’s in the U.S. - That is absolutely not the case in Canada. One can argue all day about the merits and benefits the government in Canada ( at the federal and provincial level ) reaps via their non repayable film tax credit grants, which currently are some of the most generous in the world , as well as efficiently administered . We’re not going to get into that argument here – suffice to say that we understand the government to be very satisfied with the revenues they recoup via productions in film, TV and animation being produced in Canada.

Canadian producers and investors are still very bullish on film tax credits, and the financing of these tax credits is part of an overalls strategy to get most independent productions financed and completed in the Canadian landscape, covering all ten provinces.

We stated previously that tax credits in Canada are both available and generous. Canadians producers and owners use the tax credits as part of an overall strategy to finance their productions. It is certainly very unusual that any single project in either film, tv , or animation would be financed through just one vehicle, i.e. all equity, all debt, all tax credits, all pre-sales, etc .Therefore tax credits, due to their generous nature, are a lynch pin in the overall finance strategy for tax credits film financing .

Tax credits were increased over the last couple years, due in part to re invigorate Hollywood North – aka Canada, which was starting to lose productions to Louisiana, New Mexico, Michigan, etc.

Tax credits when properly accumulated, filed, and financed (financed at your discretion of course – you could wait for the cheque!) are a combo of federal and provincial in Canada. The key credit on the federal side is the Production Services Film tax credit, which finances up to 16% of your eligible labor. That credit is further augmented at the provincial level on a province by province basis. As an example in Ontario where a large majority of filming and production is done the rebate comes to an additional 25% of the total budget spend. ( Manitoba has one of the most generous programs – Thirty % all-spend tax credit, or offset up to 65% of local labor costs on projects that start location spending/filming in that province!)

We can be forgiven for sometimes not mention Digital Animation credits which in some cases go up to 42% or more of the total spend . Only several years ago digital animation was a weak sister to the industry, but is gaining significant traction due to the popularly of animation, 3D, Shriek ! Etc. Many major animation productions are done in Canada directly by Canadian firms or offshoots of the well known major animation studios.

So the strategy and recommendation we make to clients is quite clear – understand what credit you are eligible for, select where your production creation or filming makes the most sense ( Manitoba has very cold winters !) and finance your credits as a part of your overall cobbling together of a success and profitable venture in film, tv or animation .

Is a film tax credit strategy the holy grail of your financing? Probably not , but used as one tool among your equity, debt and pre sales strategy and you have a strong chance of pulling of a successful financing for your Canadian venture.

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Stan Prokop - founder of 7 Park Avenue Financial - http://www.7parkavenuefinancial.com
Originating business financing for Canadian companies , specializing in working capital, cash flow, asset based financing . In business 6 years - has completed in excess of 45 Million $$ of financing for Canadian corporations .Info re: Canadian business financing & contact details:
http://www.7parkavenuefinancial.com/tax_credits_film_film_tax_credit.html

How To Finance CRA Tax Credits For Sred for Cash Flow Now in Canada !

Let’s kill two birds with one stone actually … should you consider financing your sred sr&Ed claim, and, how do you do it once you have made that decision.

As a Canadian business owner and financial manager your recognize that cash flow is king, and for many companies ‘ unlocking ‘ the cash flow they have tied up in CRA tax credit research claims is a solid business financing strategy . We are all familiar with the age old expression... ‘Pay me now or pay me later ‘. In the case of sred financing it becomes a similar question ‘ should I wait for my cheque from the government, ( which could actually take a year or more ) or should I finance that claim and put that cash back to work now . Your sred research keeps you competitive, so why not re invest those funds and get them working as quickly as you are able to.

When you finance your sred claim you are in effect discounting, selling, or we can even use the word ‘factoring ‘the claim. You may or may not have chosen to book the sred as an account receivable, that’s your call, but we can assure you if your claim is valid that it is a true receivable and can be monetized for cash flow and working capital now.

In general in Canada banks and tier one institutions do not finance sr&ed claims, so you should seek the advice and assistance of a experienced, credible, and trusted sred financing advisor who will assist you in monetizing your claim . The entire process can be completed in a matter of a couple weeks , and we often liken the sred financing process to any other business financing that you would contemplate – meaning simply you apply, you supply documentations on your business and the sr&ed claim, and if you qualify then your claim is financed.

We hate to hit you with another age old cliché, that being ‘time is money ‘, but quite frankly the essence of our info focuses on that statement. By that we mean that if you have a sred claim, and you have filed it already, and you are days, weeks, or perhaps a month or so away from getting your cheque, well... clearly it might not make sense to fiannce your claim. However if you haven’t filed your claim yet, or you have just filed it and haven’t had a technical or financial audit on the claim then clearly if you need the cash flow back from your r&d investment then consider financing the claim .

A ‘how to ‘for financing your sr&Ed couldn’t be easier – let’s cover off the simple basics chronologically.

They are as follows:

Determine you are eligible for the sred program
Prepare a claim
File a claim
Do some math around how long it will take you to get your money and what you could do with 70% of the claim funds being in your bank now. ( Claims are usually financed at 70% loan to value)
If the math makes sense work with a sred finance partner to submit an application with back up on your claim, who prepared it, and other very basic info on your firm.
It’s as simple as that. Weigh the cost of the financing against your opportunity cost of capital and how you would employ those funds to generate sales, profits, and greater return on capital.

The SR&ED program is probably the best government support program out their for Canadian business and industry. Take advantage of your share of the billions of dollars that go out to you in the form of non repayable grants for your investments. If it makes sense finance the claim and accelerate your cash flow and working capital.
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Stan Prokop - founder of 7 Park Avenue Financial - http://www.7parkavenuefinancial.com
Originating business financing for Canadian companies , specializing in working capital, cash flow, asset based financing . In business 6 years - has completed in excess of 45 Million $$ of financing for Canadian corporations .Info re: Canadian business financing & contact details:
http://www.7parkavenuefinancial.com/finance_cra_tax_credits_sr_ed_financing.html

5 Franchise Business Financing Tips for Entrepreneurs in Canada

Expert advice is always a good thing – so wouldn’t it be great to get some solid advice on one of the larger decisions you’ll make in your business life – buying and financing a franchise in Canada. Franchise business financing is specialized and you want to ensure you have the proper ammunition to make the acquisition of your business successful. And that means of coruse a new turnkey franchise, or, in some cases, the purchase of a franchise from an existing seller or franchisor.

Let’s explore 5 key tips that should ensure your business financing success – they are as follows –

Pick the right franchise finance partner

Ensure the type of financing offered meets your needs

Don’t count or rely on the franchisor itself for financing – that rarely if ever happens

Understand franchise lending criteria in advance, and then ensure you can qualify for those criteria
Ensure your franchise is financed for purchase as well as ongoing needs


Let’s walk through some of the key points in those 5 tips – allowing you to feel more comfortable about the franchise financing process.

In Canada franchise financing is broadly available and at the same time very boutique and specialized in nature. What do we mean by that statement? Well the majority of franchises in Canada are financed under a special government program called the BIL or CSBF program. It is underwritten and supported by the government, but in case you haven’t seen a government franchise financing office on your corner, here’s the deal on that! The program is administered by Canadian banks, but under the government auspices. We tell clients that only a limited number of Canadian bankers understand the program, can move through it efficiently, and get you approved.

We mentioned a key point in our Tips that indicated you must understand the criteria for both the above mentioned program, as well as other financing available. We advise clients that general criteria for a franchise loan are as follows : decent personal credit history , a respectable down payment ( more about that later ) , some industry experience in the type of franchise you are purchasing, and you must be a Canadian citizen or landed immigrant – bottom line – can you legally borrow in Canada . Broadly speaking satisfying those criteria should allow you to get out of the gate quickly and commence your franchise financing process.

That brings us to another tip we noted, who exactly is your franchise finance partner. For a starter, given the unique nature of franchise financing we recommend you work with a trusted, credible and experienced franchise financing consultant. He or she will guide you through the finance maze and make you aware of all issues and conditions on an up front basis.

Secondly, don’t count on your franchisor to provide financing – they like selling franchises, not borrowing on their own account to get you started. Having said that a good franchisor will give you guidance on their own chains experience in how their franchisees are typically financed. Alternative to the bank franchise finance program sponsored by the government are a handful of specialized financed companies. We also have actively recommended working with equipment financing firms to finance some of the hard assets in your new business. That rounds out the strategy quite nicely.

Purchasing the right franchise and getting it financed is job 1. Job 2 should be ensuring that you have ongoing financing needs covered for things such as working capital, additional equipment or assets that might be needed down the road, staff and sales expansion, etc. You can address this most properly by carefully tuning your initial business plan to ensure that ongoing sales and costs can be financed properly.

Make sure the business can support any debt that you take on at a future point in time.
If you cover off carefully our 5 ‘Tips’ you are well on your way to entrepreneurial success in franchise financing in Canada.

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Stan Prokop - founder of 7 Park Avenue Financial - http://www.7parkavenuefinancial.com
Originating business financing for Canadian companies , specializing in working capital, cash flow, asset based financing . In business 6 years - has completed in excess of 45 Million $$ of financing for Canadian corporations .Info re: Canadian business financing & contact details:
http://www.7parkavenuefinancial.com/franchise_business_financing.html

Why A Business Asset Based Loan Financing Is The Perfect Solution For Cash Flow In Canada

You are a Canadian business owner and financial manager looking for info and guidance on a business asset based loan. What is asset based loan financing, sometimes called cash flow factoring - how does it work, and why could it be the best solution for your firm’s working capital challenges.

Let’s cover off the basics and find out how you can benefit form this relatively speaking new form of asset financing in Canada.

A good start is to always understand and cover off some basics around what this type of financing is. Simply speaking the facility is a loan arrangement that is drawn down and repaid regularly based on your receivables, inventory, and, if required, equipment and real estate should your firm possess those assets also.

By collateralizing your assets you in effect create an ongoing borrowing base for all your assets - this feasibility then fluctuate on a daily basis based on invoices you generate, inventory you move, and cash you collect from customers. When you need more working capital you simply draw down on initial funds as covered under your asset base.

Your probably can already see the advantage, which is simply that if you have assets you have cash. Your receivables and inventory, as they grow, in effect provide you with unlimited financing.

Unlike a Canadian chartered bank financing your business asset based loan financing in effect has no cap. The alternative facility for this type of working capital financing is of course a Canadian chartered bank line of credit - that facility always comes with a cap and stringent requirements re your balance sheet and income statement quality and ratios, as well as performance covenants and personal guarantees and outside collateral . So there is a big difference in the non bank financing we have table for your consideration.

Your asset based lender works with you to manage the facility - and you are required to regularly report on your levels of A/R and inventory, which are the prime underpinnings of the financing.

Smaller firms use a particular subset of this financing, often called factoring or cash flow factoring. This specific type of financing is less transparent to your customers, as the cash flow factor might insist on verifying your invoices with customers, etc. A true asset based loan financing is usually transparent to your customers, which is the way you want it to be - You bill and collect our own invoices.

If our facility provides you with unlimited working capital then why have you potentially not heard of it and why aren’t your competitors using it. Our clients always can be forgiven for asking that question. The reality is that in the U.S. this type of financing is a multi Billion dollar industry, it has gained traction in Canada, even moreso after the financial meltdown of 2008.Some of Canada's largest corporations use the financing. And if your firm has working capital assets anywhere from 250k and up you are a candidate. Larger facilities are of course in the many millions of dollars.

The Canadian asset based financing market is very fragmented and has a combo of U.S., international and Canadian asset finance lenders. They have varying appetites for deal size, how the facility works on a daily basis, and pricing, which can be competitive to banks or significantly higher.

Speak to a trusted, credible and experienced business financing advisor and determine if the advantages of business asset based loan financing work for your firm. They have the potential of accelerating cash flow , giving you cash all the time when you need it ( assuming you have assets ) and essentially liquefying and monetizing your current assets to provide constant cash flow, and that's what its all about .
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Stan Prokop - founder of 7 Park Avenue Financial - http://www.7parkavenuefinancial.com
Originating business financing for Canadian companies , specializing in working capital, cash flow, asset based financing . In business 6 years - has completed in excess of 45 Million $$ of financing for Canadian corporations .Info re: Canadian business financing & contact details:
http://www.7parkavenuefinancial.com/Business_asset_based_loan_financing.html

Choose Your Sources of Working Capital Finance for Business Credit

You have choices in sources of working capital finance and in business credit solutions.

It is all about understanding the problem and knowing where to go for the solution, so let’s look at those two key issues. Understanding the problem is not something you have to read about, as a business owner and financial manager in Canada you live the working capital ‘ crunch ‘ or ‘ challenge ‘ every day .

Working capital is best understood as your operating capital, and you have investments in receivables, inventory, that’s where your investment currently lies, and your goal is to monetize those assets in the best manner possible.
The textbook definition doesn’t really help us out – our accountants and analysts tell us to go to the balance sheet, subtract current liabilities from current assets, and , voila! That’s working capital!

One of the biggest contradictions in working capital that you need to understand is the issues of assets, profit, liquidity and turnover. Once you have a handle of those the concept of working capital and, more importantly, the solutions start making more sense.

We hate those textbook definitions we referred to, but we will agree that the calculation we shared needs to be positive – you do need more inventory and receivables combined as measured against payables and other short term liabilities. How you manage those short term assets of A/R and inventory is what working capital is about.

Many business owners quickly realize that one of their liabilities, i.e. payables, is actually a large asset in measuring working capital and managing it. That is because if you can continue to convert inventory into A/R into cash, and slow down payables you are achieving working capital progress.

Is there a perfect way to measure your working capital needs and progress? One of those methods is to check into the ‘cash conversion cycle ‘– It’s a tool you can use to measure how low a dollar takes to flow through your company. It simply takes your inventory and receivable days outstanding, subtracts your payables days outstanding, and there is your final number. It’s a great long tool to understand your working capital progress over long periods of time.

In order to achieve solid working capital you need to increase turnover – that can be done by accelerating cash flow by borrowing against receivables, or selling receivables via a factoring process.

Your working capital solutions in Canada are limited, but they are very focused and real. Your can increase working capital today with no ones assistance simply by accelerating turnover of your assets such as receivables and inventory. If you feel your challenge is more of a long term nature a working capital term loan (if larger these loans are called subordinated debt) is the solution.

You can also generate unlimited working capital by entering into an asset based lending or working capital facility with a non bank finance firm. Don’t forget that term loans for working capital add debt and obligations to your balance sheet, so we often suggest to clients that the best solution is in fact monetizing your assets, not borrowing more – that where asset based lines of credit work best.

So whats working capital all about – it’s a case of understanding what it is, looking at how your firm performs in key metric areas of turnover, etc, and then choosing a solution that works best for your firm, whether that is long term in nature, or a bulge type facility that augments your daily cash needs. Speak to a trusted, credible and experience working capital business financing advisor to determine what choice is best for your firm.
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Stan Prokop - founder of 7 Park Avenue Financial - http://www.7parkavenuefinancial.com
Originating business financing for Canadian companies , specializing in working capital, cash flow, asset based financing . In business 6 years - has completed in excess of 45 Million $$ of financing for Canadian corporations .Info re: Canadian business financing & contact details:
http://www.7parkavenuefinancial.com/sources_working_capital_finance_business_credit.html